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Tesla fighters: GM, Toyota strategies diverge

The emergence of a new class of vehicles known colloquially as “Tesla fighters” poses a serious threat to the electric vehicle manufacturer’s position of strength, but not everyone is convinced they need one.

Tesla fighters: GM, Toyota strategies diverge

The emergence of a new class of vehicles known colloquially as “Tesla fighters” poses a serious threat to the electric vehicle manufacturer’s position of strength, even as some in the auto industry remain skeptical about the entire concept.

After Tesla raised $1.4 billion in a public offering of stock to fund the production of its mass-market Model 3 electric sedan, the automaker’s ambition to popularize electric cars — once viewed by the traditional auto companies as a fantasy — is more real than ever.

Even with conventional internal combustion engine vehicles dominating the showroom floor, most of the world's major automakers are rushing to catch up with the Silicon Valley automaker.

General Motors, Daimler, Volkswagen, Nissan, BMW, Hyundai and Ford are all developing what can be viewed as some form of direct competitor to Tesla’s pure-electric cars. GM is even set to beat Tesla to the market with a mass-market, long-range electric car: the Chevrolet Bolt, which hits showrooms in late 2016.

In a market where it can take a billion dollars to develop a new car from scratch and bring it to market, the risks of a miss are significant. Plus, it's far from clear whether customers will embrace the technology.

Sales of electric cars and plug-in hybrid vehicles represented less than 1% of U.S. vehicle sales in 2015, according to HybridCars.com.

"The proof is in the pudding — and until we see these cars sell at retail, it’s hard to say" how much potential there is, Kelley Blue Book analyst Alec Gutierrez said.

Not everyone in the industry is convinced they even need a Tesla fighter.

"The market is 17.5 million (vehicles annually) — Tesla sells 22,000. I'm not sure what I'm fighting," Toyota North America CEO Jim Lentz said recently in an interview at the Japanese automaker's Washington, D.C., office.

Indeed, the gulf in strategy between the world's largest automaker and Tesla is widening, only a few years after the two companies finished their collaboration on technological development of the low-volume electric version of the Toyota RAV4 crossover.

Toyota is charting its own course with a firm belief that hydrogen-powered vehicles are the answer, not battery-powered vehicles. The automaker has already manufactured and sold more than 100 units of the Toyota Mirai hydrogen car — all to customers in California. Lentz said the company has received another 400 orders and interest expressed by 1,900 additional customers, with plans to sell 3,000 units by 2017.

Honda and Hyundai also sell hydrogen cars, which, along with electric vehicles, help the automakers meet governmental standards on carbon emissions. The problem is there are only about 100 hydrogen refueling stations in the entire world, according to research firm IHS, creating a massive infrastructure challenge.

"Having a large, expensive battery that takes eight hours to charge to give you longer range at 300 miles we don't believe is the way to go," Lentz said. "We think the better battery is a hydrogen fuel cell. It's basically an on-demand battery that can drive for 300 miles, that can refuel in three to five minutes and has nothing but water vapor as exhaust. We believe that's the better way to go."

Tesla declined to comment on the record for this article. But the company said May 18 in a securities filing that it expects to make 500,000 vehicles a year in 2018, ahead of its previous target of 2020. The base version of the Model 3 is expected to cost less than $28,000 after tax credits.

What Tesla brings to the table that many of the major automakers lack is a brand with fervent followers and a degree of social electricity that engenders fierce loyalty. Nearly 400,000 people have placed $1,000 refundable deposits on the Model 3, less than two months after the vehicle was revealed.

"The other competitors may match up, but there’s that cachet of brand with Tesla," said Michelle Krebs, analyst at AutoTrader.com. "Right now there’s a bloom on that rose. If that lasts we’ll see."

AutoPacific analyst Dave Sullivan said the Tesla fighters need to focus on more than just range and price. Tesla set a new bar on design, for example.

"It needs to be stylish. It needs to make your jaw drop when you see it, not just deliver at least 200 miles of range," Sullivan said. "Is it follow-the-leader? Maybe. But there seems to be more points that need to be delivered on."

Several automakers are targeting Tesla directly:

GM. The Detroit automaker, once derided by environmentalists for killing its 1990s EV1 electric car, is now set to beat Tesla to the market for a long-range mass-market electric car. The Bolt can travel more than 200 miles on a single charge of electricity and costs $30,000 after tax credits.

"It's the first to crack that code," Chevrolet spokesman Fred Ligouri said. "This is a space in which we have quite a bit of experience and one in which we’re excited to deliver what we see as a game-changer. ... We’re confident the market will take note and consumners will take note of the vehicle when it’s offered at dealerships."

GM's record fighting Tesla already has one blemish, however. The automaker recently discontinued production of the Cadillac ELR luxury plug-in hybrid after it failed to win over customers.

Volkswagen Group. The German automaker plans to introduce 20 new electric or plug-in vehicles by 2020, part of a new strategy to rehabilitate the company's reputation for sustainability in the wake of its devastating diesel emissions scandal.

One of them is the Porsche Mission E electric sports car, which will get the equivalent of 600 horsepower and travel more than 300 miles on a charge. Another contender is an Audi electric crossover, likely modeled after the e-tron quattro concept revealed at the Frankfurt Motor Show in September. That vehicle would compete directly with Tesla's Model X crossover.

Honda. The Japanese automaker recently announced plans to launch three vehicles under the Clarity nameplate: a hydrogen car, electric vehicle and plug-in hybrid car coming in 2016, 2017 and 2018, respectively.

Ford. The Dearborn, Mich.-based automaker is set to deliver 13 new battery-powered cars, plug-in hybrids and hybrids by 2020, including an electric version of the Focus sedan that's expected to get at least 200 miles on a charge as early as 2018.

Daimler. The German automaker, which sells the Mercedes-Benz luxury brand, confirmed in April that it is making what chairman Dieter Zetsche described as "a large electric automobile with range of 500 kilometers on the market before the end of this decade."

The company is also developing a platform that can be used as a foundation to make additional electric cars, which will be fitted with batteries made at a second Daimler battery factory that's drawing a 500 million-euro investment from the company.

"In the long term, the future belongs to electric drive systems — in spite of the historically low price of oil," Zetsche told investors.

Nissan. Maker of the best-selling battery-powered car of all-time, the short-range Leaf, Nissan starts this race with a built-in technological advantage. CEO Carlos Ghosn told the New York Auto Show in March that he remains bullish on electric cars, but it's unclear when the Japanese automaker will deliver a vehicle with range of at least 200 miles.